GUELPH, ON, Feb. 14, 2019 /CNW/ - Co-operators General Insurance Company ("Co-operators General") today announced its consolidated financial results for the three months and year ended December 31, 2018. For the fourth quarter, Co-operators General reported consolidated net loss of $18.2 million, compared to net income of $64.8 million for the same quarter in 2017. Loss per common share was $0.81 for the fourth quarter, compared to earnings per share of $2.84 for the same period last year. Direct written premium was $845.4 million in the quarter, an increase of $160.2 million as compared to $685.2 million in the fourth quarter last year.
Net loss for the year amounted to $37.1 million, compared to net income of $121.1 million in 2017. This resulted in a loss per common share of $2.03 compared to earnings per share of $5.17 in 2017. Direct written premium increased 20.3% to $3,295.9 million, compared to $2,740.4 million in 2017.
"This has been a challenging year. Extreme weather and increased claims frequency has negatively impacted our underwriting results. In addition, a difficult investment climate, particularly in the fourth quarter of 2018, led to further challenges," said Rob Wesseling, president and CEO of The Co-operators.
"Despite this, we achieved revenue growth across all lines of business and all regions, through sustained policy growth and targeted rate action. Our capital position remains strong, and we continue to take necessary actions to return us to profitability."
CO-OPERATORS GENERAL FOURTH QUARTER FINANCIAL HIGHLIGHTS
(in millions of Canadian dollars except ROE, EPS and ratios) |
||||
4th quarter |
4th quarter |
2018 |
2017 |
|
20181 |
2017 |
YTD1 |
YTD |
|
Key financial data |
||||
Direct written premium (DWP) |
845.4 |
685.2 |
3,295.9 |
2,740.4 |
Net earned premium (NEP) |
760.8 |
664.8 |
2,886.9 |
2,559.1 |
Net income (loss) |
(18.2) |
64.8 |
(37.1) |
121.1 |
Total assets |
6,698.7 |
5,922.1 |
6,698.7 |
5,922.1 |
Shareholders' equity |
1,649.9 |
1,531.1 |
1,649.9 |
1,531.1 |
Key success indicators |
||||
DWP growth |
23.4% |
7.2% |
20.3% |
6.5% |
NEP growth |
14.4% |
7.1% |
12.8% |
6.6% |
Earnings (loss) per share (EPS) |
($0.81) |
$2.84 |
($2.03) |
$5.17 |
Annualized return on equity (ROE) |
(4.7%) |
19.8% |
(2.5%) |
8.5% |
Combined ratio - excluding market yield adjustment |
102.2% |
100.3% |
105.2% |
103.2% |
Combined ratio - including market yield adjustment |
102.7% |
98.0% |
105.0% |
102.4% |
Minimum Capital Test (MCT) |
208% |
216% |
208% |
216% |
1 |
Amounts presented include the results of operations and balance sheet of CUMIS General Insurance Company (CUMIS General) from the date of acquisition, April 1, 2018 |
FOURTH QUARTER REVIEW
Effective April 1, 2018, we acquired CUMIS General Insurance Company (CUMIS General). CUMIS General's results of operations and balance sheet are therefore included in our consolidated results from that date forward. CUMIS General was previously a subsidiary of a company under common control.
Fourth quarter DWP increased by 23.4% to $845.4 million, compared to $685.2 million in the fourth quarter of 2017. The fourth quarter results of CUMIS General contributed $94.1 million to the overall increase. Excluding the impact of CUMIS General, DWP improved by 9.6% or $66.1 million. This increase was attributable to higher average premiums and sustained policy growth across all our core products and regions, particularly in the auto and home lines of business in Ontario and the Western regions.
The combined ratio, excluding the market yield adjustment (MYA), for the quarter was higher at 102.2% compared to 100.3% in the fourth quarter of 2017. The fourth quarter loss ratio, excluding MYA, deteriorated to 70.0% from 67.7%. Undiscounted net claims and adjustment expenses increased compared to the same period of the prior year as a result of an increase in the severity of current year accident claims in our auto line of business in Ontario. This impact was partially offset by decreases in the frequency of current year accident claims in our home, commercial and farm lines of business, mainly in the Western and Ontario regions.
Net investment income and gains for the fourth quarter of 2018 decreased to a loss of $15.5 million, compared to gains of $65.4 million in the same period of the prior year. The unfavourable change was largely driven by unrealized preferred share losses and realized net foreign exchange losses as a result of weakness in the equity markets.
The Company's investment portfolio is comprised of high quality and well diversified assets. The credit quality of our bond portfolio remains high with 96.8% of our bonds considered investment grade and 86.4% rated A or higher. Our equity portfolio is 85.8% weighted in Canadian stocks.
ANNUAL REVIEW
DWP for the year increased by 20.3% to $3,295.9 million, compared to $2,740.4 million in 2017. CUMIS General's current period results contributed $269.0 million to this increase. Excluding the impact of CUMIS General, DWP grew by 10.5% or $286.5 million. This increase was primarily driven by higher average premiums and sustained policy growth across all regions and core lines of business, an improvement from the 6.5% growth seen in 2017.
NEP increased by $327.8 million or 12.8% to $2,886.9 million as a result of growth seen in all of our geographic regions and all core lines of business.
Excluding the MYA, the combined ratio deteriorated to 105.2% from 103.2% in 2017, largely a result of an increase in claims in our auto, home and commercial lines of business. Other operating expenses increased over the prior year by $76.2 million; however, NEP rose at a faster pace resulting in an improvement in the expense ratio of 1.2 percentage points to 31.9%.
Net investment income increased by $12.3 million in 2018 as compared to the prior year as a result of higher dividend distributions from pooled fund and limited partnership investments. Unfavourable changes in the fair value of our investment portfolio, in line with weakness in the equity markets driven by market volatility and economic uncertainty, led to net investment losses of $64.3 million compared to net investment gains of $83.3 million in the prior year.
CAPITAL
The Company's capital position remains strong, as the Minimum Capital Test for Co-operators General was 208% at December 31, 2018, well above the internal and regulatory minimum requirements.
FORWARD-LOOKING STATEMENTS
This document may contain forward-looking statements and forward-looking information, including statements regarding the operations, objectives, strategies, financial situation and performance of Co-operators General. These statements generally can be identified by the use of forward-looking words such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "plan", "would", "should", "could", "trend", "predict", "likely", "potential" or "continue" or the negative thereof and similar variations. These statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the forward-looking statements or information. Although we believe that the expectations reflected in the forward-looking statements and information are reasonable, there can be no assurance that such expectations will prove to be correct. Consequently, we make no representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements and information.
ABOUT CO-OPERATORS GENERAL INSURANCE COMPANY
With assets of more than $6.6 billion, Co-operators General is a leading Canadian multi-product insurance company. Co-operators General is part of The Co-operators Group Limited, a Canadian co‑operative. Through its group of companies it offers home, auto, life, group, travel, commercial and farm insurance, as well as investment products. The Co-operators is well known for its community involvement and its commitment to sustainability, and is listed among the Best Employers in Canada by Aon Hewitt and Corporate Knights' Best 50 Corporate Citizens in Canada.
Co-operators General Class E, Series C Preference Shares trade under ticker symbol CCS.PR.C on the Toronto Stock Exchange (TSX). Further information can be found at www.cooperators.ca.
SOURCE The Co-operators
Karen Higgins, Executive Vice-President, Finance and Chief Financial Officer, Telephone: (519) 840-3167
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